Your business clearly needs to make a profit – or at least be solvent. It’s been a tough 18 months for all of us. We are all reeling.
No doubt you are doing your best to keep your business afloat and growing. Whatever business you are in, large or small, it can be hard to concentrate on what really matters. The numbers. It is easy to put this exercise off – especially if you proclaim not to be a ’numbers person’ – or you leave things to your accountant.
You’ve heard this before – you’re busy working IN your business and there’s no time to work ON your business.
Cashflow of course relies on a good income, and that is often your main focus in tough times, but it is easy to lose sight of the money which is going OUT, and making sure that every penny is working for you. As a leader in your business, look at what you are doing every day and put some time aside to concentrate on whether every penny is.
I was talking today with a group of small business owners – the prices of many things have increased and it’s not obvious. ‘I’ve not got the time to shop around – I’m too busy’. ‘My accountant deals with that’.
Finding the time to have a detailed examination of your daily/weekly/monthly outgoings may well throw out opportunities you have missed. Think about what you are spending your money on – and look at the DETAIL. Bring your team with you on this – ask many questions, but set time aside regularly to scrutinise where your money is going. It may surprise you. Create a business process to do this so it happens without you having to think. Put it in your diary as a regular occurrence.
Think about EVERY cost line and what it is made up of. Be in control.
Your Cost of Sales: Supply costs have gone up for many goods – the pandemic, Brexit, supply chain costs. These costs impact your COS and you need to ensure that every part of your business is scrutinised to ensure that your final profit conversion is the best it can be. It of course depends on your product. Think what an extra penny on a Kg of cheese will do to the profits of Pizza Hut for instance.
Standing orders/Direct debits: What is this? What is that? I didn’t realise that had gone up!
I have discovered businesses who have been still paying HP for printers and photocopiers which have already been picked up and replaced! Thousands of pounds a year. Beware of Direct Debits.
We’ve always done it that way: ‘I leave that to xxx to sort out’. ‘That’s what we’ve always done’ – Why fix it if it’s not broken? Of course you should trust others, but have they a strict budget to work to? Are they accountable? How strictly are you in enforcing it? Do you even check?
Are you renting a printer and Paying per copy? Do you have a colour email footer? One business saved £12,000 a year in toner/ink and paper supplies by making the company default printer setting black and white, with colour only available for specific need. They invested in staff training on how to change the print settings so everyone printed what they needed, when they needed it – and in black and white. Simple?
Am I getting value for money for this? The price of physical stock items need to be scrutinised regularly to avoid cost creep, but one area which I find SME owners are not in control is their Marketing process. Is your CRM working for you? Could it be more efficient and do better things for less money? Is your digital marketing working for you? Are you getting the returns? You MUST evaluate where your leads are coming from and where potential leads will emanate from. It is no good having a Pay per Click campaign if no-one clicks, or conversely, having a Facebook marketing budget if your clients are more likely to be on LinkedIn.
Your Employee costs: A hot topic. Things have changed radically. Whilst you need to look after your team, and especially those returning from furlough, but as things have changed, you need to ensure that every hour you are paying someone for is translating into revenue and profit for your business. It has been easy to fall into the trap of resetting how it was, not where it will be. This needs careful scrutiny, strategic planning and then execution in a professional and caring way.
Once again – it’s about asking questions of your team, and yourself, and be disciplined about giving yourself time to look at every detail of the business.
Revenue is vanity, profit is sanity as they say. Cost scrutiny is a good place to start.